Posted November 11, 2009 by Zach Heard

The Extended Home Buyer Tax Credit is in Effect - Do You Qualify?

In case you haven't heard, the home buyer's tax credit has been extended - and modified! The bill was signed into law on November 6th and now offers existing home owners the opportunity to take advantage of the homebuyer tax credit which was previously only offered to first-time home buyers. Along with the tax credit being offered to existing home owners, the new law also extends the deadline for purchasing and closing on a home, and raises the income limits for homeowners who want to claim the credit. Let’s break it down and see if you qualify.

Under the new law, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return.

For the first time, long-time homeowners who buy a replacement principal residence may also claim a homebuyer credit of up to $6,500. They must have lived in the same principal residence for any five-consecutive year period during the previous eight years.

People with higher incomes can now qualify for the credit. Income limits for both types of buyers are now $125,000 for individuals and $225,000 for couples; however, individuals who make up $145,000 and couples that make $245,000 can still claim a portion of the credit. This is up significantly from the previous thresholds of $75,000 and $150,000.

And on a final note, the purchase price of the home must be under $800,000 (the $800,000 is an absolute ceiling).

If you have any questions regarding the new, modified tax credit please feel free to call or email me anytime. I’ve included some FAQ’s below.

Till next time,

Zach Heard

FAQ's:

Will the tax credit need to be repaid?

No, the buyer does not need to repay the tax credit if he/she occupies the home for 3 years or more. If the property is sold during the 3 year period, the full amount of the credit will be recouped on the sale.

Which properties are eligible?

The tax credit may be applied only to primary residences, including: single-family homes, condos, townhomes, and co-ops.

If the Buyer's income exceeds the limits, can he/she still get a credit?

Yes, some buyers may still be eligible for a credit. A smaller portion of the credit is available for single buyers who earn between $125,000 and $145,000 and between $225,000 and $245,000 for couples.

For Existing Home-Owners: Does the new house have to cost more than the old house?

No, buyers who move from a high cost area to a lower cost area who meet the eligibility requirements will qualify for the $6,500 credit.

For Existing Home-Owners: I owned my home for 10 years, but sold it 2 years ago and have been renting since. If I purchase a home, will I be eligible for the $6,500 tax credit if I meet all the requirements?

Yes, because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify.